The Case for Doing Nothing

[jeffrey]

I am a huge proponent, at all times, of doing nothing. Remember when everyone was filling bunkers with millet because computers wouldn't be able to handle a year with three zeros in it? I stayed Calvin Coolidge cool. After America was attacked on 9/11, I suggested keeping our armies home. When John McCain responded to the economic crisis he'd have to deal with as president by suspending his campaign, I started to think that maybe he's my guy after all.

Even though I understand so little about economics that much of my long-term investments are tied up in Costco products, I feel pretty sure that letting Congress give Treasury Secretary Henry Paulson $700 billion to buy super-crappy mortgages is not the right call.

Sure, like any American, when I see a photo on the Internet of an adorable little investment bank and find out it's at risk of being put to sleep, I want to throw in $2,000 to $3,000 of my own money to adopt it. But instead of jacking up inflation, letting the dollar sink further and paying higher taxes so we can keep up cheap borrowing -- which is what this plan amounts to -- I think we need to let those who made bad loans get burned. We need to accept that credit will dry up and that maybe -- for just a bit -- we'll have to stop buying more than we can afford...

Bailout? Just do nothing - Los Angeles Times

[irmanator]

i agree.

[PrincessPerky]

I thoroughly agree, doing nothing is a VERY effective plan.

The finances of America are all muddled in part due to govt interference. Sometimes you gotta learn your lesson.

[kork13]

More I look at it, maybe "nothing" would be a decent way to go.... I don't know, but I'd like to see the markets fix themselves. It might be rough, but assuming this thing "capitalism" and "free market" are viable economic policies, it'll all work itself out. somehow, I expect we'd all survive. but again, .... i don't know....

[cptacek]

The government has to do one thing: change the laws to what they were before Sarbanes-Oxley. Then get out of the way.

[Broken Arrow]

Awwww.... why me?

I don't believe in such simplisms such as simply "Doing Nothing". Rather, I believe in "Doing the Best Thing". If the best thing is to do nothing, then I will do nothing, but if the best thing is to do something, then I will do something.

The author brought up Y2K. I didn't stockpile either, not because I thought doing nothing was the right answer, but because after analyzing the situation and what people were doing about it, I decided that there was no cause for worry.

The author also brought up 9/11. I still believe in military action towards Afghanistan. To not go after the culprits behind the Twin Tower terrorist attacks would be pure lunacy. What would that tell them? "Hey, it's OK to attack America. They're not going to do anything about it." However, I did not agree with invading Iraq. Afghanistan, yes. Iraq, no.

As for this mortgage crisis and the bailout proposal, ordinarily, I too would against government bailouts. However, these are not ordinary times. As I have mentioned in another thread, when a wound is not too severe or when the patient is still strong enough to heal on its own, it's best for (free market) nature to take its course.

However, there are times when our patient is so ill or that the wounds are so severe that to heal on its own simply isn't an option. I believe we are at this point. Remember the Great Depression? Remember today's 700+ point market drop? When we become too ill or too wounded to heal on our own, we seek help. The economy, to me, is no different in this sense.

So, I would agree with the case to do nothing earlier, but not now. There are no standing laws that says a free market economy can heal itself from every wound and illness. Sometimes, it requires government intervention. The lack of government invention is partly what got us into the Great Depression, and government intervention is what got us out of it.

Frankly, I'd rather not take the chance that simply "Doing Nothing" will actually work.

[Aleta]

Broken Arrow: I also don't believe that they can FIX the problem in a weeks time. The American taxpayers haven't been included in this discussion about what is actually happening. Who are the top financial advisors advising our Congress. Not all of the Congressmen and Congresswomen are financial experts. I don't like the idea of people without the expertise making decisions that could last for so many years.

Actually, I watch both parties and they act just like kindergartners. I got you, no, I got you. There is too much hate for George Bush for people to be able to be fair about negotiating. Also, you can't start giving the money away again to the same people who should not have had the loans in the first place. As was said earlier, I think we need to stand back and take a deep breath.

I would like to see a hearing about this and its implications on our economy using different scenarios. Also, there are so many in Congress that have their own fingerprints on this that I'm sure they wouldn't want this to become public.

I'm proud of the senators who stood up and said no. They were listening to their constituents. Phones were ringing off the hook and they were flooded with emails from angry voters.

[Broken Arrow]

Er... I don't believe that it can be fixed in a week either. In my defense, I don't think I've ever said that. At most, I do think they need to come to a decision within a week or so.

For what it's worth, I believe these hearings are available publically through C-Span.

I know this is a highly contentious issue right now. That's why I was dreading going into it.

As for the best solutions, actually, what cptacek said may be it.... I don't know yet. A lot to digest and grasp.

Still, the bailout program is what's on the table right now. The anger is people who don't want to see fat cat CEOs get a free "get out of jail" card. That's understandable, but perhaps a metaphor will help.

You've got a house on fire in your neighborhood. The fire is getting to a point where it may spread and catch other homes on fire. Homes from good people who has little to nothing to do with what's going on with their neighbors. Sure the house on fire was a run-down meth lab anyway, and the neighbors were drug dealers. Let it burn to the ground.

However, because the blaze has gotten big enough that it could pose a risk to the houses around it, would it be worth putting out this house's fire in order to protect the others? I think so. Even if it means having save the drug dealers and their meth lab house too.

That's how I think of it anyways. For now, we need to contain the fire, not necessarily to save the "Fat Cats", but to make sure those around it are not at risk. We can always hold them accountable later.

Lastly, I think it's worth mentioning that the bailout panel will be a 5 person board that includes I believe Paulson, Bernanke, and 3 others from both sides of the aisle, and even if the money is approved, candidates would still have to be approved by the panel to get any money. So, it's not a free-for-all.

Also, there is a... possibility that we may not even need the full proposed $700B. Even if the legislation for the full amount is passed (which I doubt), that doesn't mean all of it has to be spent. Just as much as it takes to stabilize the neighborhood. So, in that sense, I don't mind Paulson showing up with a 700 ton fire truck. He doesn't have to use everything at his disposal. I just want him to show up with it, just in case, but use only as much as is needed to contain the fire.

[PrincessPerky]

I think in a case such as the fire, 'wetting down' the neighboring houses is actually a good idea (one firefighters do practice)

Not that I have looked into the total financial picture enough to know which way the wind will blow or which houses need watered.

err, not spend all approved? does the govt know how to not spend every penny?

[Broken Arrow]

err, not spend all approved? does the govt know how to not spend every penny?

I know, hard to believe eh? But believe it or not, yes. Paulson was a former CEO of Goldman Sachs. And the fact that the bailout plan was shot down obviously suggests that even if a future incarnation of it was approved, his panel's every move would be intensely scrutinized.

And yes, it is possible for Paulson to selectively "water down" neighboring houses. His panel would have the power to select who gets bailout money and who doesn't.

[Aleta]

I know that a lot of this is on CSpan. Not everyone has cable or satellite. My point is that you need more people other than government officials to advise us. You have to have people who have no horse in the race so to speak. Although I think we all have a horse in the race. It's not an easy situation and I don't pretend to know the answers. But many people who played the rules right don't like the idea of bailing out this situation.

[jIM_Ohio]

Doing nothing lets us see what the "worst case" situation is. I don't want to see worst case. No way. We have further to fall than the Great Depression, which also means a longer way to recover- do any of us want to retire in our kids lifetime?

I think the bailout is warranted because worst case is unknown and can be really really bad. 90% unemployment bad. 90% homeless bad.

I have a mortgage and owe more than the house is worth. I can afford to make payments if I work. But if the credit crunch forces my company to lay me off, my mortgage defaults and the credit crisis gets worse.

I am at no risk of defaulting if I work. Mortgage fits easily into our budget and we pay a little extra on it to boot.

The worst case gets worse if I lose my job. No thanks.

[maat55]

I believe the free interprise approach would be faster and more effective. Problem is, you can't get the socialist oops, I mean democrats to go along.

Eliminate the capital gains for two years and change the Mark to Market rules would do plenty, the free market way. Lowering the corporate tax would be icing on the cake.

This way, the idiots pay their dues. The bailout is nothing more than a slow working bandaid that they will want to change later with a cast.

[jIM_Ohio]

I believe the free interprise approach would be faster and more effective. Problem is, you can't get the socialist oops, I mean democrats to go along.

Eliminate the capital gains for two years and change the Mark to Market rules would do plenty, the free market way. Lowering the corporate tax would be icing on the cake.

This way, the idiots pay their dues. The bailout is nothing more than a slow working bandaid that they will want to change later with a cast.

Drinking too much of the Rush Limbaugh Kool Aid.

[maat55]

Drinking too much of the Rush Limbaugh Kool Aid.

I haven't listen to Rush in years. I got tired of non stop Dem bashing. I happen to believe what I stated.